The utter absurdity of the new tax code just when we thought they fixed the broken old one, what’s next?
It was new tax laws that killed the mainstay farms from the glory days of racing, you remember the ones who bred to race not sell, the best horses money couldn’t buy as not a single hair was for sale
There’s a special kind of arrogance that only comes out of Washington when lawmakers start tinkering with gambling laws they clearly don’t understand. And the One Big Beautiful Bill Act—the OBBBA, signed on July 4th, 2025—may be the most stunning example of that ignorance in years. Tucked deep inside the fireworks and flag-waving was a ticking time bomb: a 90% cap on gambling-loss deductions, set to take effect on January 1, 2026.
The government somehow managed to reinvent the concept of “income” into something only a bureaucrat could love: phantom profit—money you never actually kept, but still owe taxes on.
For decades, the rules were harsh but fair. If you won money, you paid tax. If you lost money, you could deduct those losses up to your winnings. Simple. Symmetrical. Logical.
That logic is now dead.
The Math Not Even a Politician Could Defend
Let’s boil this down the way a gambler does—not the way a Congressional staffer who’s never played a $5 blackjack hand imagines it works.
Say over the course of a year you win $100,000 and lose $100,000. You broke even. Zero. A wash.
Under the old rules?
You deducted the $100,000 and your taxable gambling income was $0.
Under the new 2026 rule?
You may only deduct 90% of your losses:
- Winnings: $100,000
- Allowed deduction: $90,000
- Taxable “income”: $10,000
You owe tax on ten thousand dollars you never made. I know, it is hard to keep a straight face.
And it scales into madness.
A high-volume professional bettor turning over $5 million—winning $5M, losing $5M—now gets hit with a $500,000 taxable event on what is, in reality, a net profit of exactly zero.
This isn’t taxation—it’s extortion by spreadsheet.
Micro Events vs. Macro Reality: Where the IRS Still Doesn’t Get It
Here’s the disconnect: gamblers operate on sessions and bankroll cycles, not on each spin or each punch of a ticket.
Put $100 into a slot machine, grind for hours, produce $5,000 in “wins” and walk away losing $100.
Reality: You lost a hundred bucks.
IRS 2026 Reality: You had $5,000 of income but may only deduct $4,500.
Now you owe tax—on a losing session.
If any other industry were told they could only deduct 90% of their cost of goods sold, Congress would be tarred and feathered on the Capitol steps by morning. But gamblers? We’re a politically safe punching bag.
Washington wants a risk-free partnership:
You take the risk, they take the rake.
Who Gets Hurt? Everyone Who Actually Plays This Game
The Hobbyist
Already buried under a high standard deduction—now hit with phantom income despite losing money. The IRS has figured out how to tax heartbreak.
The Professional
The folks grinding a 1–2% ROI—sharp bettors, poker pros, blackjack counter teams—are about to be legislated out of existence. A 10% phantom tax doesn’t just wipe out their edge; it shoves them into negative ROI overnight.
The U.S. will lose legal professionals to offshore markets faster than regulators can pretend to “study the issue.”
The Political Fight: Ugly, Bipartisan, and Heating Up
The gambling world did something rare in 2025: it united. Players, casinos, ADWs, racetracks, and the American Gaming Association came out swinging.
And thanks to that pressure, here’s where we stand as of late 2025–early 2026:
1. The FAIR BET Act (H.R. 4304) – The Main Push to Undo the Damage
Rep. Dina Titus (D–NV) introduced it within weeks of OBBBA’s signing. It completely restores the 100% deduction.
As of December 2025:
- It has 70+ bipartisan cosponsors,
- The House Ways & Means Committee held a preliminary hearing,
- And the bill is slated for a markup window in early 2026.
2. The WAGER Act – The Republican Counterpart
Backed heavily by casino-state Republicans. It accomplishes the same repeal but also proposes indexing gambling-loss rules to inflation. This is one of the rare fights where everybody agrees Washington screwed up.
3. The New Senate Companion Bill (Filed December 2025)
Sen. Catherine Cortez Masto (D–NV) and Sen. Todd Young (R–IN) jointly filed the Senate version.
The bipartisan messaging was loud and clear:
“If a taxpayer didn’t keep the money, the IRS shouldn’t tax it.”
Finally, a line of logic on Capitol Hill—mark your calendars.
4. Treasury’s November 2025 “Interpretation Memo” (Made It Worse)
Treasury released guidance tightening the definition of “session reporting,” potentially requiring even more granular documentation for gamblers.
Translation:
They doubled down on misunderstanding how gambling works.
5. The 2026 Budget Reconciliation Framework
Buried in the early draft (released January 2026) is an amendment to delay the cap until 2027.
Not repeal—just delay.
Politicians love the slow-walk. Pain postponed is still pain delivered.
What Happens Now?
If Congress doesn’t pass repeal by mid-2026, gamblers will get hit with the most absurd tax rule the sport, the casinos, and the bettors have ever seen. The AGA, the Nevada delegation, tribal interests, racing groups, and even the online sportsbooks are pushing hard—but Washington moves on political urgency, not logic.
And gamblers aren’t a voting bloc. We’re an ATM.
The Bottom Line: The House Always Wins… and Now the IRS Wants a Seat at the Table
This 90% loss-deduction cap doesn’t just misunderstand gambling—it kills the fundamental fairness the tax code relied on for decades. It invents income, ignores math, punishes the people who actually participate in legal wagering, and threatens to push an entire segment of the industry offshore.
When you tax money the gambler never kept, you cross a moral line.
You steal.
And right now, unless Congress reverses course, Washington is gearing up for the biggest heist the gambling world has ever seen. Add this to the CAW’s and all the other “issues” the game faces and it looks like 2026 will be a most interesting in the history of the Sport of Kings.
